Only $7.5-$24.5 million left after fully shutting down project, paying back feds

Streetcar Project Executive John Deatrick on Thursday
revealed that the city might only keep $7.5-$24.5 million if it cancels
the $132.8 million streetcar project.

That means the city could potentially spend more than 94
percent of the project’s total costs before it manages to fully close
down the streetcar project, which is currently undergoing construction
and tied up to various federal grants and business contracts.

The presentation was given in advance of Mayor-elect John
Cranley and the newly elected City Council taking office in December.
Cranley is an ardent opponent of the streetcar project, and a majority
of the City Council says it wants to pause the project and consider
cancellation.

Cranley’s proposed alternative to the streetcar — a trolley bus system
— would cost $10-$15 million in capital funds, according to supporters of the rubber-tire trolley alternative.If streetcar cancellation costs were to reach the high end of the city’s estimate and the trolley bus is paid for, the city could end up spending $140.3 million to cancel the streetcar project and build a
considerably less ambitious trolley bus line — about $7.5 million more
than it would cost to simply complete the streetcar project.

If it’s completed, Cincinnati Budget Director Lea Eriksen says operating the streetcar would cost between $3.4-$4.5 million each year, which city officials say could come from various potential sources, including a special improvement district that would raise property taxes within three blocks of the streetcar route.

Following Deatrick’s presentation, Cranley held a press conference in which he flatly denied the current city administration’s estimates. He says he will tap new experts to run over the numbers while the project is put on pause.

“We’re going to bring in new, objective leadership, not the current leadership that is clearly biased toward the project and intent on defying the will of the voters, which was clearly expressed a couple weeks ago in this election,” Cranley says.

Deatrick’s cancellation projections account for $32.8 million in estimated sunk costs through November and a potential range of $30.6-$47.6 million in close-out costs, which include
construction to close the project — such as
repaving torn-up roads — and orders on vehicles and other
supplies that are already placed but not officially billed.

The federal government has also allocated $44.9 million in
federal grants to the streetcar project.

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In a letter released by the
city administration on Nov. 14, the Federal Transit Administration (FTA)
explicitly stated that $40.9 million would be taken back if the project
didn’t adequately progress; the remaining $4 million would be left
under the supervision of Gov. John Kasich, who could shift the money to
other parts of the state.

But Deatrick’s estimates don’t consider the unknown cost
of litigation, which would need to come out of a city operating budget that is already structurally imbalanced,
according to Meg Olberding, the city’s spokesperson.

The estimates also don’t consider that the city could
potentially forgo spending $7.4 million in contingency funds on the
project if it goes through completion and remains within budget, which
would lower the project’s effective cost to $125.4 million.

If the city cancels the project, Deatrick says it’s also
more likely that the city would lose in its legal battle against Duke
Energy, which could add up to $15 million in costs. That money is
tentatively allocated from the sale of the Blue Ash Airport as the city
and Duke argue in court as to who has to pay for moving utility lines to
accommodate for the streetcar tracks.

Those are the potential financial costs, but city
officials also warn that canceling the project could have a detrimental
impact on the city’s image.

“That’s what the city would be known for forever,” says
Councilwoman Laure Quinlivan. “To throw this away would be
unconscionable.”

City officials also warn that canceling would be pulling
back on a light rail project that President Barack Obama’s
administration has clearly prioritized.

“The city-federal relationship is excellent right now,” Deatrick says. “There would be immediate damage to that.”

The 200-plus workers currently involved the project would
also be displaced. Councilwoman Yvette Simpson points out pausing or
canceling the project in December would leave those workers jobless for
the holiday season.

Another concern is the impact of cancellation on the
relationship between the federal government and Southwest Ohio Regional
Transit Authority (SORTA), which operates the Metro bus system and will
operate the streetcar if it’s completed. If the city is unable to pay back
the grants to the federal government within 30 days, Deatrick says
the FTA could cut SORTA grants for bus service and potentially halt some
local bus services.

One concern raised by Councilman Chris Seelbach and
Councilman-elect Kevin Flynn, one of the three potential swing votes in
the incoming council of nine, is whether the project’s estimated return on
investment is still 2.7-to-1 over 35 years. That number is derived from a
2007 study conducted by consulting firm HDR, which was later evaluated
and affirmed by the University of Cincinnati.

Deatrick points out the numbers were re-evaluated by HDR
in 2011, and they still seem to hold true. He says there are still
plenty of vacant buildings along the 3.6-mile streetcar line that could use the encouraged investment, despite
some of the revitalization seen in the Over-the-Rhine and downtown areas
that the streetcar route would cover.

The 2.7-to-1 return on investment is also “a very, very
conservative estimate,” says Deatrick. He claims HDR could have relied
on numbers from other cities, such as Portland, Ore., that saw
considerably better returns on their streetcar systems.

Still, Flynn and Councilman-elect David Mann, another
potential swing vote, say they want to scrutinize the cancellation
estimates before making a final decision on the project.

Vice Mayor Roxanne Qualls, a long-time streetcar supporter
who lost to Cranley in her mayoral bid, encourages a re-examination of
the numbers. But she cautions, “If what has been presented today stands up to scrutiny,
there’s absolutely no reason to cancel the project.”

Flynn won’t say whether he would reconsider his past
opposition to the project if the numbers hold up. But Mann says, “If
they do hold up, that’s fairly persuasive.”

Both Flynn and Mann also say that they would be willing to pause the project while clearer estimates are crunched.

But that could present a short time window. If the project
doesn’t adequately progress, the federal government could take back its
grant money. Based on city officials’ estimates, that provides a 30-day
window to re-calculate cancellation costs and the potential return on investment.

Pausing the project would also impose its own set of costs as some workers and equipment are retained.

Councilman P.G. Sittenfeld, who’s also seen as a swing
vote, could not be reached for comment. He’s currently in Washington,
D.C., to meet with White House officials for an issue unrelated to the
streetcar.

Three elected council members already support the streetcar project, so only two of the three potential swing votes would need to vote in favor of it to keep it going.

Updated with Mayor-elect John Cranley’s comments and clearer, corrected numbers.